Microcrédit

The Origin of the microcrédit

One can find origins old in the Mutuelle S of agricultural credit created in Europe at the end of the 19th century. The system was taken again, adapted then developed by the professor of economy Muhammad Yunus during the 30 last years.

After studies with the the United States (University Vanderbilt), Yunus gives courses of economy to Chittagong with the Bangladesh, its town of origin. At a meeting of practical works of a course of investment, he proposes with his students to question the manufacturers of stools in bamboo of the closest villages. The 42 women craftsmen need 27 dollars on the whole to develop their activity. However all the banks refuse to finance this too weak amount with insolvent customers a priori . Yunus states to have been ashamed of this situation and lends the sum of its own pocket. While making it possible to the producers to buy in advance the Bamboo without undergoing the important variations of price, they succeed in creating jobs and refunding Yunus completely.

Since 1999, the methodology of credit adopted by the institutions of microfinance takes in an increasing way the shape of a flexible individual product, resembling the traditional banking products more. The form chosen in the beginning was based on the methodology of collective credit, using the mechanisms of local saving and joint and several guarantee and the supervision of the pars to cover the credit risk. Were quickly added financings external resting on a system of Titrisation of the wallets of credit.

Institutions

The the World Bank listed 10.000 institutions of microfinance in 85 countries, with the service of 16 million the poor. In November 2002, took place a top with New York on this subject which gathered 2000 delegated of more than 100 countries.

In 1976, the pr. Yunus creates the Grameen Bank , organization which proposes loans with poorest of Bangladesh. Grameen Bank granted approximately 3 billion euros of appropriations to more than 2,4 million borrowers. It received the Nobel Prize of peace 2006.

Created in 1998, PlaNet Finance is one of principal the International organization of development of the sector of the microfinance. She proposes services of technical assistance, notation and financing to the whole of the actors of the microfinance.

In France, the main operator is the Association for the right on the initiative economic. It delivers 6 to 7000 loans per annum in creative unemployed or Rmistes of their own employment. Association counts more than 130 agencies on all France. In Belgium, two institutions dominate this sphere, the Funds of participation and co-operative CREDAL.

Characteristics of the microcrédit

A system recognized at the world level

The microcrédit is regarded by the United Nations as a major tool of the development. The organization declared 2005 international Année of the microcrédit , within the framework of the Objectifs of the Millenium for the Development.

The January 24th 2005, a report/ratio of the the World Bank drew up an positive assessment. The number of recipients is estimated there at 500 million (out of the 3 billion poor people). The Asia and the Pacifique add up 83% of the accounts open in the developing countries, which represents 17 accounts for 100 inhabitants. With the Kampuchea, that concerns 400.000 people, and 18.000 new accounts are open each year to the Kenya. However it is in Latin America and in particular in Bolivia that the system makes formidable great strides, this country seems one of the most advanced countries and most competitive of the microfinance.

October 13rd, 2006, the Nobel Prize of peace was jointly allotted to Muhammad Yunus and Grameen Bank. " a durable peace cannot be obtained without an important part of the population finding the means of leaving poverty " , Ole Danbolt Mjoes, the president of the Nobel committee declared. France: Maria Nowak, president of Adie and the European Réseau of microfinance greets the attribution of the Nobel Prize of Peace with Muhammad Yunus and is thus delighted by the recognition carried to the microcrédit.

A purpose directed towards local development

The activity of microcrédit encourages the Microprojet S at the local level. That makes it possible to induce changes " with the base". Those are often more effective and have a greater domino effect - by creating an economic grid in the country - which certain infrastructures or certain large industrial projects which seldom profit with poorest. This action leverage makes it possible to effectively act near those which take initiatives while engaging personally, i.e. the contractors or the craftsmen.

But beyond the simple financial aspect, the programs of microcrédit have also an impact on local development. Indeed, they touch sectors as various as agriculture (village groupings, co-operative country-women, agricultural professional organizations), the craft industry (groupings of craftsmen, female artisanal associations), the financing of the social economy (mutual insurance companies of saving and credit, banks village), the Social protection (mutual of health, cases of primary health). Thus, they contribute to the improvement of the access to the basic social services, the health care, the services of family planning and drinking water.

Often female recipients

Moreover, concerning slightly capitalized sectors often employing a female labor, one can also regard the microcredit as a lever of revalorization of the woman in the countries in the process of development, of direct improvement of their fate (and of that of their family) and like a factor of major evolution of the companies by the rebalancing which it induces between the sexes (cf the sales leaflet in this direction on the www.planetfinance.org site: ).

Another characteristic of this movement is that it is based on networks of relatively effective insurance and traditional solidarity which support the regular refunding of the loans. The installation of these programs also offers opportunity of leading education acts, in particular as regards Community development and management of company.

Interest rates higher than the traditional banking environment

The adversaries of the microcrédit often oppose to him high rates of certain loans (approximately 20%). They also regret that this mechanism diverts the actions of the other programs like health, education or water. A study carried out in 2004 estimates that the microcrédit supports not very profitable activities and should be accompanied by social programs. Certain actors of the microcrédit denounce governmental organizations who would use the microcrédit as funding source.

Answer to this criticism: the credits which call upon the microcrédit do not have an other access to the credit. In general, their only recourse are the usurers who apply rates approaching the 1% per day! With rates lain in general between 10 and 30% per annum, the organizations of microcrédit offer an access to controllable appropriations to the active contractors of the countries in the process of development. In the well managed institutions, the rates of refunding of these appropriations border 95%, proof that the rates are not at all insurmountable. High rates are ascribable according to the cases to the costs of important labor (necessary for the selection and the follow-up of customers living in sometimes distant zones) and cost of refinancing of the institutions, reinforced by important rates of inflation. Lastly, the requirements out of computer material and other goods (office equipment, vehicles), often imported, inflate the operating costs. The authorized loans are supplied with a psychological, social and technical accompaniment whose expenses are entered in the heading of operation.

A solution among others to allow the development

In addition, the actions of microcrédit do not divert the other humane programs which answer emergency actions or of development in the form of gifts. The actions of microcrédit are financed by the interdependent saving and “thus do not compete with” not directly the other types of development actions durable. It is often more desirable to bind the microcrédit to other mechanisms of development assistances, the two more complementary tools being substitutable.

Perhaps the microcrédit improves the situation of poorest. However, the measurement of the impact remains very difficult to carry out. No econometric study still caused a broad consensus. If the examples of individual successes due to the microfinance are legions, it is difficult to generalize the effectiveness of the microfinance for several reasons: how to know if the recipient could not have had access to the market of the credit locally without the assistance of a IMF? (skew of selection) If such is the case, success is not with the microfinance. How to know if the money is invested in projects with added-value? How to know if it would not have taken place in any event via an abstract saving? (fungibility of the assistance). Lastly, some think that the microcrédit is rather a means of saving and insurance and not a source of investment. The households would constitute a cagnote, a mattress of financial protection, would thus smooth their incomes, and would not invest in a generating activity of income. That does not remove anything with the utility microcrédit and the microfinance, but undoubtedly decreases the potential of job creation and the collatéraux/" effects; side effects" such an amount of waited by the partisans microcrédit.

Resources

External bonds

Report/ratio on the microfinance and its stakes in 2005, by Valerie de Briey, catholic University of Leuwen
Year of the microfinance: the overdose or to change concept? CIRAD
the microfinance in India analyzes: statistical data and zoom on the Groups Coil-Help, by Cyril Fouillet, LEFI-Lyon II/French Institute of Pondichéry
Article of Michel Lelart, researcher of CNRS
Michel Lelart, Two tests on the microfinance, the father of the microcrédit honoured by the Nobel Prize… with Peace, Document of Research, Laboratory of Saving in Orleans, 2007
the Symbiotics directory contains the references of more than 2000 active institutions in microfinance.
Training college of Rural Finance, electronic gate of the Group of the Rural Financing of FAO, this site offers many resources (documents, formations on line, etc) for the institutions of microfinance wishing to provide services microfinanciers in rural environment.

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